Consolidation of banks stalled

The much hyped consolidation move of state owned banks has been put on the backburner once again. The government has asked the banks to focus on expansion of financial inclusion programmes by expanding their branch network.

“Consolidation is not the priority anymore and banks are expanding their branch network to reach out to the unbanked areas, the targets have changed completely,” a government official told Hindustan Times.

Last year, finance minister Pranab Mukherjee had underlined the importance of going ahead with consolidation in state owned banks saying that the move would enhance the competitiveness and performance of Indian banks while reducing the risks.

The banking trade unions have shown strong opposition to the move. They have threatened to go on nationwide strikes in case there was any move to consolidate banks.

“At this point, the government does not want any incident that may jeopardise the banking system in the country, especially with several projects underway, such as the Unique Identification System (UID) and the expansion of the National Rural Employment Guarantee scheme,” the official said.

The State Bank of India had initiated the process of merging its associate banks with itself. In August 2008, SBI merged State Bank of Saurashtra with itself. It has also got the nod to merge State Bank of Indore with itself and the process is underway.